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Form 990 'Transparency' Issue Misunderstood Yet Under Scrutiny: Help Us Protect the Integrity of the Sector!

Monday, December 3, 2012

In late October, the Chicago Tribune published another in a line of articles on nonprofits, highlighting a new bill by Illinois State Representative Greg Harris (D-Chicago). Prompted by the Tribune’s earlier pieces, Harris’ bill would require some nonprofits, whose contracts and grants are exempted under the Illinois Procurement Code, to disclose relationships with private management companies and for-profit subsidiaries, as a way to uncover executive compensation. In a conversation with Donors Forum, Harris told us this is a “transparency” issue.

In a meeting with Rep. Harris after the article was published, Donors Forum agreed that it is important for nonprofits receiving public dollars to disclose key employee compensation.

It is important to note, however, that nonprofits are currently required to disclose compensation on the 990, even in those instances where they have engaged a private management firm.

And while we agreed that disclosure of executive compensation should always be the norm, Donors Forum has concerns about creating unnecessary duplicative regulatory requirements for nonprofits. We will continue to watch Rep. Harris’ bill with an eye toward avoiding further redundancies.

Donors Forum researched the disclosure requirements of the 990. The research included consultation nonprofit tax advisers, auditors, and management association professionals. Here is what we found:

We, our boards, and our staff need to know and follow the requirements and intricacies of the 990 – the primary reporting tool for our sector. A helpful fact sheet from Donors Forum on this topic will be forthcoming.

We Need Your Voice! As stewards of public dollars, it is critical for our nonprofit community not only to know the rules but to abide by them. We are a catalyzing voice for policies that make our sector stronger and more effective; our strength rests in you. If you’ve spoken with a policymaker about these and other nonprofit transparency issues, let us know: send an email to advocacy@donorsforum.org.